Deputy Prime Minister Najib Razak has ruled out a royal commission of inquiry into shock claims from a businessman that he had been forced to buy Malaysian Airlines to help bail out the country's central bank.

One-time high-flying tycoon Tajudin Ramli, the former chairperson of the national carrier, last week filed a suit alleging ex-premier Dr Mahathir Mohamad forced him into "national service" to buy Malaysia Airlines (MAS) from the central bank in 1994.

News of the claims, which emerged yesterday, has sent shockwaves through Malaysian political circles and prompted calls from opposition leader Lim Kit Siang for a royal commission on inquiry.

But Najib, who served under Mahathir and has denied knowledge of the deal, dismissed the calls for an inquiry.

"It's a matter of a court case so I don't think there is a need to have a royal commission," Najib told reporters, adding he would not comment further for fear of sub-judice in the suit, filed to Kuala Lumpur's High Court.

"I don't want to comment too much. No, no, no, enough, otherwise it would be sub-judice. It is going to be a court case. In fact, I should not have said what I said yesterday," he added.

Well-connected Tajudin purchased a controlling stake of 29 percent in Malaysia Airlines in 1994 from Bank Negara, paying eight ringgit per share when the market price was around half that.

Non-performing in 1997

The businessman, in his 104-page claim, alleged Mahathir directed him to buy the ailing carrier after Bank Negara suffered massive foreign exchange losses, due partly to speculation in foreign currency markets, according to the Sun newspaper.

Tajudin reluctantly took out a RM1.8 billion loan for the purchase, pledging other companies he owned as collateral.

The loans became non-performing during the 1997 Asian financial crisis and were taken over by then-national asset management agency Danaharta, along with Tajudin's companies, including mobile provider Celcom, since acquired by state-owned Telekom Malaysia.

The government bought back the loss-making airline in 2000 in what was widely seen as a bailout for Tajudin, paying eight ringgit per share, again more than twice its market value at the time.

Tajudin was one of a number of Malay entrepreneurs hand-picked by Mahathir as part of efforts to boost the wealth of the country's native Malays, the majority ethnic group known as bumiputras.

Analysts and opposition politicians say the claims have exposed the murky and sometimes uncomfortable ties between the government and bumiputra businesses, and raised questions over government transparency in deals.

The New Straits Times, reporting today on the secret deal, said the claims were "mind-boggling" and would "likely send tremors through the corridors of business and politics".